By Shinichi Saoshiro
TOKYO (Reuters) - Asian shares shrugged off tensions in the Ukraine and followed Wall Street higher on Tuesday, while the dollar held its recent gains against the yen and euro thanks to stronger U.S. Treasury yields.
Indian shares were expected to rally strongly when markets open later in the day, boosted by exit polls predicting India's business-friendly opposition party winning in the world's biggest ever elections.
Indian-based assets in global markets surged on Monday after the exit polls, including the 1-month rupee NDF and U.S.-listed shares of Indian banks such as ICICI Bank.
MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.4 percent and Tokyo's Nikkei gained 1.9 percent.
The Dow and S&P 500 hit record closing highs on Monday, as strong corporate results and an improving economic outlook spurred a broad rally on Wall Street.
Equity markets have so far brushed off a weekend referendum in Ukraine, where pro-Moscow rebel organizers said nearly 90 percent had voted in favour of self-rule, possibly inflaming the conflict.
"Investors are so far taking (Russian President Vladimir) Putin at his word that eastern Ukraine will not be repeat performance of Crimea and don't seem too concerned about the next round of US/EU sanctions given the weakness of those offered to date," Jasper Lawler, market analyst at CMC Markets, wrote in a note to clients.
"With Donetsk now officially asking to join Russia, Putin's diplomacy will be fully put to the test," Lawler added.
The markets are also likely to be focused on industrial production and retail sales data from China expected later on Tuesday. Weak readings could depress risk-sentiment, though they may also fuel expectations for further stimulus measures from Beijing.
China's economy is growing at its slowest pace in decades, with recent data suggesting a challenging outlook over the next year.
The dollar brushed a one-week high of 102.22 yen, helped by higher U.S. Treasury yields on investor caution ahead of a slew of data this week that could paint a brighter economic picture.
The euro remained on the defensive at $1.3755, stuck close to a one-month low of $1.3745 hit on Friday after European Central Bank President Mario Draghi fired a verbal warning against the common currency's recent gains.
The benchmark 10-year U.S. Treasury note yielded 2.66 percent after hitting 2.67 percent on Monday, its highest since May 2.
The oil market remained a little more sensitive to tensions in the Ukraine, with U.S. crude trading little changed at $100.55 a barrel after gaining 60 cents on Monday.
(Editing by Shri Navaratnam)